In Harcus Sinclair LLP v Your Lawyers Ltd [2022] AC 1271 ('Harcus'), Lord Briggs, Lord Hamblen and Lord Burrows (with whom Lord Lloyd-Jones and Lady Arden agreed) considered the solicitors' undertaking. After:
(1) stating 'The court's supervisory jurisdiction to enforce solicitors’ undertakings is an aspect of its inherent jurisdiction over solicitors as officers of the court. This inherent jurisdiction has its origins in medieval times.' (paragraph 94), and then providing some historical context (paragraphs 95 to 99)
(2) stating that '...the inherent jurisdiction “is exercised, not for the purpose of enforcing legal rights, but for the purpose of enforcing honourable conduct on the part of the court's own officers”. As stated by Hamilton J in United Mining and Finance Corpn Ltd v Becher [1910] 2 KB 296, 305:
“The conduct which is required of solicitors is to this extent perhaps raised to a higher standard than the conduct required of ordinary men, in that it is subject to the special control which a court exercises over officers so that in certain cases they may be called upon summarily to perform their undertakings, even where the contention that they are not liable to perform them is entirely free from any taint of moral misconduct.”' (paragraph 99)
In Harcus, Lord Briggs, Lord Hamblen and Lord Burrows stated, at paragraphs 101 to 103:
'Solicitors are expected to abide by solicitors’ undertakings and may be called upon to do so summarily if they do not do so - see the Fox case at p 928C per Nicholls LJ. Failure to implement a solicitor's undertaking is prima facie to be regarded as misconduct on the solicitor's part - see the Udall case at p 917F per Balcombe LJ.
Solicitors’ undertakings are frequently given in litigation and in relation to transactional work, particularly conveyancing. Their importance in conveyancing was explained by Smith LJ in Briggs v Law Society [2005] EWHC 1830 (Admin) at [35], as follows:
“Undertakings are the bedrock of our system of conveyancing. The recipient of an undertaking must be able to assume that once given it will be scrupulously performed. If property purchasers and mortgage lenders cannot have complete confidence in the safety of the money they put into the hands of a solicitor in the course of a property transaction, our system of conveyancing would soon break down. The breach of an undertaking given by a solicitor damages public confidence in the profession and in the system of undertakings upon which property transactions depend.”
A solicitor's undertaking involves a promise to do or refrain from doing a certain act. It will often be contractual, but it need not be and there is no requirement of consideration or of legal enforceability. For example, in In re Greaves (1827) 1 Cr & J 374 the Court of Common Pleas held that the fact that an undertaking was void, as a result of contravening the Statute of Frauds, was no bar to its enforcement - see the Fox case [1988] QB 925, 931F per Sir John Donaldson MR; the Udall case [1988] QB 907, 919 per Kerr LJ.'
In paragraphs 104 to 116, Lord Briggs, Lord Hamblen and Lord Burrows in Harcus stated:
'The mere fact that the undertaking is given by a solicitor does not make it a solicitor's undertaking. The generally accepted test is that the undertaking must be given by the solicitor in his or her “capacity as a solicitor” - see, for example, United Mining and Finance Corpn Ltd v Becher [1910] 2 KB 296, 306 per Hamilton J; Geoffrey Silver & Drake v Baines [1971] 1 QB 396, 402G per Lord Denning MR; the Fox case at p 928 per Nicholls LJ; United Bank of Kuwait Ltd v Hammoud [1988] 1 WLR 1051, 1063 per Staughton LJ. It is the fact that the undertaking is given professionally that engages the court's supervisory jurisdiction. The court is concerned with undertakings given by solicitors in their professional capacity rather than in some other capacity, such as their private capacity - see Geoffrey Silver & Drake v Baines [1971] 1 QB 396, 403G per Widgery LJ.
An example of an undertaking given by solicitors in their capacity as solicitors would be an undertaking to hold money or deeds to another's order in relation to a property transaction in respect of which they were engaged by a client. An example falling on the other side of the line would be an undertaking to hold or pay money in relation to the lease of a solicitor's office space. Another such example, falling outside what counts as a solicitor's undertaking, and closer to the facts of this case, would be an undertaking given under a covenant by a solicitor on leaving a firm not to work for any client of the firm for a period of time, as in Bridge v Deacons [1984] AC 705. It has never been suggested that such covenants are or should be summarily enforceable as solicitors’ undertakings.
In the courts below it was argued by Harcus Sinclair that an undertaking can only be a solicitor's undertaking if it is given in connection with a transaction involving a client or if it is given to the court or to a third party. Before this court, [counsel] for Harcus Sinclair did not maintain that these were determinative matters. He did, however, submit that they are important indicators of whether an undertaking is a solicitor's undertaking and are therefore relevant matters to take into account. We agree that they are common and relevant indicators. Other such indicators are whether the solicitor is acting on instructions and whether the solicitor is acting in a personal or business capacity rather than a professional capacity.
The difficulty of determining in borderline cases whether, in giving an undertaking, solicitors are acting in their capacity of solicitors is illustrated by the case law.
Examples of undertakings held to be given by solicitors acting in their capacity as solicitors include the following. An undertaking by a solicitor to repay money to a third party in the event that negotiations for an agreement between the third party and the solicitor's client did not result in agreement by a certain date - see United Mining and Finance Corpn Ltd v Becher [1910] 2 KB 296. An undertaking by a solicitor given to his client's former solicitors not to release moneys in his possession belonging to the client until a dispute between them over unpaid fees had been sorted out - see Fox's case [1988] QB 925. An undertaking, provided in the context of proceedings brought for the recovery of moneys due, given by the defendant's solicitor to the claimant's solicitor that the directors of the defendant would provide security for its liabilities to the claimant by creating second charges in the claimant's favour on their personal properties - see the Udall case [1988] QB 907.
Examples of undertakings held not to be given by solicitors acting in their capacity as solicitors include the following. An undertaking given by an assistant solicitor on behalf of his firm that an advance of moneys obtained for a client of the firm from another firm of solicitors would be repaid by a certain date with interest at 2% a month - see Geoffrey Silver & Drake v Baines [1971] 1 QB 396. An undertaking by a solicitor to repay moneys due or to become due to the claimant from a third party and a guarantee of a third party's obligation to repay a loan to the claimant with interest - see Ruparel v Awan [2001] 1 Lloyd's Rep PN 258.
In a number of the authorities the issue of whether the undertaking was a solicitor's undertaking overlapped with the issue of whether it bound the solicitor's partnership. In United Bank of Kuwait v Hammoud [1988] 1 WLR 1051 Staughton LJ regarded these issues as raising effectively the same question. In that context he commented as follows, at p 1063, having regard to the evidence in that case:
“First, in the case of an undertaking to pay money, a fund to draw on must be in the hands of, or under the control of, the firm; or at any rate there must be a reasonable expectation that it will come into the firm's hands. Solicitors are not in business to pledge their own credit on behalf of clients unless they are fairly confident that money will be available so that they can reimburse themselves. Secondly, the actual or expected fund must come into their hands in the course of some ulterior transaction which is itself the sort of work that solicitors undertake. It is not the ordinary business of solicitors to receive money or a promise from their client, in order that without more they can give an undertaking to a third party. Some other service must be involved.”
Statements to similar effect were made in Geoffrey Silver & Drake v Baines [1971] 1 QB 396. At pp 402-403 Lord Denning MR stated as follows:
“The first question in the present case is whether the solicitor gave the undertaking ‘in his capacity as a solicitor’. This is difficult to define. But I think it will usually be found, in regard to money, that it is an undertaking to pay money which he has in his hands on trust, or on an undertaking that he will apply it in a particular way. Thus if a solicitor is acting for a client on the sale of land and gives an undertaking to a bank that he will pay over so much of the money, when received, to the bank, the undertaking is given ‘in his capacity as solicitor’: see In re A Solicitor (Lincoln) [1966] 1 WLR 1604. So also, if a solicitor gives an undertaking that he will hold a sum of money in his hands pending the conclusion of negotiations, that too is given in his capacity as a solicitor, as in United Mining and Finance Corpn Ltd v Becher [1910] 2 KB 296. But this case is very different from either of those cases. The solicitor here was not holding money in his hands at all. All that happened was that Mr Batts received money and paid it over to a client, Mr Izzet, and promised to repay it to Mr Silver. It was an undertaking to repay money lent. That is all. It was at good interest too, 2% a month. The money may have been for the benefit of a client. But that does not matter. It was in truth nothing more nor less than an undertaking to repay money lent. That is not an undertaking ‘in his capacity as a solicitor’.”
At pp 403–404 Widgery LJ stated as follows:
“the first requirement of the exercise of that jurisdiction, as Lord Denning MR has pointed out, is that the undertaking in question must have been given by the solicitor in the course of his activities as a solicitor. It must be given by him professionally as a solicitor and not in his personal capacity. The reason for that is clear enough, because a remedy of this kind is intended primarily to discipline the officers of the court, to ensure the honesty of those officers. The court is thus concerned only with their activities as solicitors, and anything done by a solicitor in his private capacity is outside this jurisdiction.
“What is the position here? … On its face it is simply an undertaking to repay a debt which is being contracted by the solicitor in question. If a solicitor borrows money personally and incurs a personal obligation in that regard, his promise to pay that money is not a promise in his capacity as a solicitor, even though he sits in his office when he receives the money and even though he acknowledges the debt on his professionally headed notepaper. Another possible view of this particular case is that this was in truth the giving of a guarantee by a solicitor for a debt incurred by his client. But looking at it in that way it seems to me to make no difference. Here again one cannot describe this as an act done in the capacity of a solicitor merely because a client of the partnership was involved in the transaction. The position, of course, would have been wholly different if the sense of the transaction had been that the solicitor was to receive this money and undertake to apply it in a particular way. In those circumstances one would have a conventional type of solicitor's undertaking.”
These passages were cited in Ruparel v Awan [2001] 1 Lloyd's Rep PN 258 in which United Bank of Kuwait v Hammoud United [1988] 1 WLR 1051 and Geoffrey Silver & Drake v Baines [1971] 1 QB 396 were regarded by the deputy High Court judge, David Donaldson QC, as supporting the following general proposition, as stated at p 262: “The mere fact that the giver of the undertaking happens to be a solicitor is not enough. The undertaking must … be given as part of or in connection with a transaction or activity which is ‘solicitorial’.”
General statements such as those set out above provide guidance but they do not lay down any definitive test. As further guidance, we consider that in many cases it will be helpful to consider the following two questions when determining whether an undertaking is given by solicitors in their “capacity as solicitors”. The first concerns the subject matter of the undertaking and whether what the undertaking requires the solicitor to do (or not to do) is something which solicitors regularly carry out (or refrain from doing) as part of their ordinary professional practice. The second concerns the reason for the giving of the undertaking and the extent to which the cause or matter to which it relates involves the sort of work which solicitors regularly carry out as part of their ordinary professional practice. If both questions are answered affirmatively then the undertaking is likely to be a solicitor's undertaking.
This can be illustrated by reference to the three examples given in para 104 above.
An undertaking to hold money or deeds to order in relation to a property transaction in respect of which solicitors were engaged by a client: (i) involves an undertaking to do something which solicitors do regularly as part of their ordinary professional practice when acting for clients in relation to property transactions, and (ii) is given to facilitate a property transaction for a client which is the sort of work which solicitors regularly carry out as part of their ordinary professional practice.
An undertaking to hold or pay money in relation to the lease of a solicitor's office space: (i) does not involve an undertaking to do something which solicitors do regularly as part of their ordinary professional practice because it involves the solicitors acting in relation to the property transaction in their own right and for their own business interests rather than on behalf of any client, and (ii) the reason for giving the undertaking is furtherance of the firm's business interests rather than that of any client and acting in their own name and for their own benefit is not the sort of work which solicitors regularly carry out as part of their ordinary professional practice.
An undertaking by a solicitor not to work for the clients of a firm which a solicitor was leaving: (i) does not involve an undertaking not to do something which solicitors regularly refrain from doing as part of their ordinary professional practice as solicitors because they are not in practice to preclude themselves from acting for clients, and (ii) the reason for giving the undertaking is protection of the firm's business interests rather than that of any client and the cause or matter to which it relates is the business of the firm rather than any professional service.'
On the facts in Harcus, a non-compete undertaking, which was the subject of the appeal, was held to be, not a solicitor's undertaking (paragraph 124)[1].
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[1] In Harcus Sinclair LLP v Your Lawyers Ltd [2022] AC 1271 ('Harcus'), Lord Briggs, Lord Hamblen and Lord Burrows (with whom Lord Lloyd-Jones and Lady Arden agreed) said, at paragraphs 117 to 124:
'Addressing the first of these questions in relation to the facts of the present case, the subject matter of the undertaking is a promise not to compete with another law firm. That does not involve the sort of work which solicitors undertake not to do as part of their ordinary professional practice. Solicitors are in practice to carry out work, not to disable themselves from doing so and it is difficult to conceive of circumstances in which a solicitor's non-compete undertaking could ever be given on behalf of a client.
Addressing the second of these questions, the undertaking was given because it was required by Your Lawyers before they would disclose confidential information to Harcus Sinclair. Your Lawyers required the undertaking because it wanted to protect the business opportunity it had identified. Harcus Sinclair wanted to see the confidential information in order to consider whether to pursue that business opportunity in collaboration with Your Lawyers. The cause or matter to which the undertaking related was a potential business opportunity. The reason for giving the undertaking was furtherance of the parties’ business interests rather than that of any client and acting in their own rather than a client's business interests is not the sort of work which solicitors regularly carry out as part of their ordinary professional practice.
In summary, this was a business arrangement and in giving the undertaking Harcus Sinclair was acting in a business capacity rather than a professional capacity. As the Court of Appeal commented at para 98, it was “part of the commercial relationships between solicitors”.
In the course of oral argument before the Court of Appeal the Chancellor observed that the non-compete undertaking was “not the usual stuff of solicitors’ undertakings” and asked whether there is “any case which is anything close to this in the whole history of the jurisdiction of the court over its officers”. Your Lawyers has been unable to identify any such case.
The judge reached a contrary conclusion. His essential reasoning is set out at paras 236–239 of his judgment:
“236. It seems to me quite clear that the undertaking in sentence 2 was given by the first claimant as part of a solicitorial service. I say this for the following reasons.
“237. The NDA recorded, in clause 1, that the defendant intended to disclose information to the first claimant ‘for the purpose of obtaining legal advice’ from the first claimant. The giving of legal advice is a classic instance of a solicitorial service.
“238. Looking at the matter more widely, the NDA was put in place at the outset of a process of collaboration between the defendant and the first claimant in respect of the working up of the defendant's group claim. The working up of this group claim involved a set of activities which can all be correctly described as solicitorial services. Preparing a legal claim for a client or a group of clients is another classic instance of a solicitorial service.
“239. The whole point of sentence 2 was to protect the defendant from the first claimant accepting instructions from or acting on behalf of any other group of claimants in the contemplated group action. I will have to decide what precisely these words meant in the next section of this judgment. For present purposes the important point is that sentence 2 was intended to provide the defendant with a particular form of protection in connection with the first claimant giving its advice and, more generally, in connection with the intended collaboration between the defendant and the first claimant.”
The judge did not address the subject matter of the undertaking and whether it involved the sort of work which solicitors undertake as part of their ordinary professional practice. Had he done so he would have been bound to conclude that it did not. In so far as he considered the reason for the giving of the undertaking and the cause or matter to which it related he did so in an unrealistically narrow manner. It is correct that the NDA states that the confidential information was to be provided “for the purpose of obtaining legal advice” from Harcus Sinclair and that that is a solicitorial service. The non-compete undertaking has, however, nothing to do with the provision of legal advice. It does not assist in the giving or understanding of any such advice. It is addressing an entirely different matter, namely the protection of Your Lawyers’ business interests. The advice was not being provided to Your Lawyers as an actual or potential client of Harcus Sinclair, but as a potential business collaborator. As the judge recognised, the non-compete undertaking related to the intended collaboration between the two firms—ie the proposed business arrangement between them. A business arrangement between two law firms is not the sort of work which solicitors undertake as part of their ordinary professional practice. It is a business matter rather than a professional matter, even if the business in question relates to the provision of professional services. In determining whether the non-compete undertaking was a solicitor's undertaking, the judge did not therefore address the right questions, and, if and to the extent that he did, he did so incorrectly and this led him to reach the wrong conclusion. In so doing he erred in law.
[Counsel] for Your Lawyers submitted that the capacity in which Harcus Sinclair was acting is a matter of fact and that it is not appropriate for this court to review or replace the decision of the judge. Whilst there may be some cases in which the issue of capacity turns on matters of fact, in most cases it is likely to involve a mixed question of fact and law, and it does in this case. Having full regard to the factual findings made by the judge, he has adopted an erroneous legal approach to the issue of capacity and reached a wrong conclusion. His decision can and should be overturned; and, as the Court of Appeal did not directly address this issue, it is appropriate for this court to overturn the judge's decision that the non-compete undertaking was a solicitor's undertaking.
For all these reasons, we conclude that the non-compete undertaking was not a solicitor's undertaking.'